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When Someone Dies, Does Their Life Insurance Payout Become Part of Their Estate?

Question: If someone has chosen a beneficiary for their life insurance policy, does the insurance payout become part of the inheritance after the death of that person or is it only given to the beneficiary?

Answer: To answer your question, I need to refer to Civil Transaction Law 5 of 1995 and its amendments, as this law governs the relationship between the insurance company and beneficiary. Article 1050 of the law states that: “1. The insured may provide that the sum assured be paid to persons specified in the contract or to be nominated at a later date. 2. If the insurance is made for the benefit of the spouse of the insured, his sons, descendants or his heirs, the sum insured shall be due to those who effectively have these qualifications at the death of the insured. Should the heirs be the beneficiaries, the sum assured shall be divided upon them in accordance with their legal shares in the estate.” Also, article 1055 of the same law states: “Amounts agreed to be paid upon death of the insured shall not be included in his estate.” So, the heirs of the person could share the insurance policy payout only if all of them are named as beneficiaries. If only one of the heirs are named as the beneficiary, he/she is entitled to take the whole amount, regardless of the application of the rights of other inheritors. Confirming the above point of view is Supreme Court orders that state the beneficiary as the person to whom the amount of the insurance will be transferred after the death. The effect of identifying the beneficiary is that the beneficiary would receive the money directly, without the sum having to go to the monetary account of the insured. The identification of the beneficiary is subject to the court’s discretionary power.